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Brief Exercise 3-5 On July 1, 2019, Blossom Company pays $24,300 to Kalter Insurance Co. for a 3-year insurance contract. Both companies have fiscal years ending December 31. For Blossom Company, journalize and post the entry on July 1 and the annual adjusting entry on December 31. (Credit account titles are automatically Indented when the amount is entered. Do not indent manually Record journal entries in the order presented in the problem Date Account Titles Debit Prepaid Insurance Insurance Expense
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Question & Answer: Brief Exercise 3-5 On July 1, 2019, Blossom Company pays $24,300 to Kalter Insurance Co. for a 3-year insurance contract. Both compan…..
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Answer :- Journal entries
| Date | Account Titles | Debit ($) | Credit ($) |
| July 1, 2019 | Preapid insurance A/c Dr.
To Cash A/c |
24300 | 24300 |
| December 31, 2019 | Insurance expense A/c Dr.
To Prepaid insurance A/c |
4050 | 4050 |
(4050 = 24300 * 6 / 12 * 1 / 3)
Prepaid insurance A/c
| Particulars | Debit ($) | Particulars | Credit ($) |
| To Cash A/c | 24300 | By Insurance expense A/c
By balance carried forward A/c |
4050
20250 |
| Total | 24300 | Total | 24300 |
Insurance expense A/c
| Particulars | Debit ($) | Particulars | Credit ($) |
| To Prepaid insurance A/c | 4050 | By Income Summary A/c | 4050 |
(Income summary account is also referred to as Profit & Loss account).
